Gartner Advises Businesses to Buy Relationships not Technology
Outsourcing Market to Grow At 14 Percent through 2005 But Analysts Warn It Does Not Reduce Costs
Cannes, France, November 5, 2001 - Gartner, Inc. (NYSE: IT and ITB) today revealed new forecasts predicting that the growth in the IT services market is slowing down, while outsourcing is set to buck the trend and grow at 14 percent year on year through 2005. Speaking at its annual European Symposium ITxpo conference in Cannes this week, analysts said outsourcing presents a particularly attractive value proposition today because it can be a strategy for funding and managing new IT initiatives in times of economic downturn. However, outsourcing of the future will not be the same.

Analysts warned that outsourcing that is focussed on cost reduction alone can come to grief. Gartner advised businesses to put strategic sourcing at the centrepiece of their business, to enable effective use of capital, provide the right resources at the right time and enable enterprises to focus on their core competencies.

Roger Cox, Vice President sourcing management, said, "The concept of buying and owning all products, services and resources is becoming a thing of the past. Relationships are the future and IT and businesses managers are coming under increasing pressure to establish and manage long term relationships with a wide portfolio of suppliers."

However, he warned managers they are currently signing contracts that are out of date even before they get off the ground. Cox said, "Long term deals are being struck on the basis of one years frantic transformation followed by six years "steady state", but the reality is there will be no steady state, only continuous transformation. In this climate, service providers will increasingly find themselves unable to sell long term deals that fail to plan for continuous change."

Elena Christopher, senior analyst Gartner Dataquest added, "Normal will never be the same again. The IT services market is entering the toughest environment in recent history and is set for a shake out."

Christopher said that no single provider is able to be everything to everybody. Service providers are therefore experiencing the need to take some of their own medicine - focus on core competencies and partner with companies that can provide key capabilities better.

This will leave the industry with a number of large aggregators at one end of the spectrum with a range of niche/specialist players at the other. Some of the larger service providers will do both, but companies left in the middle will struggle to survive.

Gartner's Three Criteria for Making Sourcing a Success

Review Your Strategy
  • Is it a core business process - or just a collection of ad hoc projects?
  • Will it support your business in 2002 and beyond?
  • Do you know how market changes in the IT services market will affect you?
  • Have you got the capability to manage all of this?

Check the Health of Your Long-Term Deals
  • Do they consider what your business will need in the future?
  • How dependent is your business on the deal working well?
  • Review exit management on a regular basis.
  • Is relationship management a defined and sustainable process?

Challenge the Status Quo
  • Don't accept contracts based on a "transition to a steady state solution, it won't happen.


Gartner's Advise to Service Providers

Decide what your core capability is
  • Aggregator or niche provider?
  • Do you have a general approach to market or an industry vertical focus?
  • Are your main services based on low cost utility or high value-add?

Develop revenue stability
  • Ongoing services contracts assure revenue backlog
  • Relationships with aggregators will provide a key channel to market.
Focus on relationships
  • Build long term deals designed for continuous change
  • Help the customer manage you
  • Be prepared to take risk
  • Make exit easy or at least a viable option


Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look today at the future of IT. For more than 10,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts, and a place to gain insights into how their organisations can use technology to address business challenges and improve operational efficiency. For more information online, go to www.gartner.com/symposium.

About Gartner, Inc.
Gartner, Inc. is a research and advisory firm that helps more than 11,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Conn., and has 4,300 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. The company achieved fiscal 2001 revenues of $952 million. For more information, visit www.gartner.com.

Contact:
Laurence Goasduf
Gartner
+ 44 1784 267-195
laurence.goasduf@gartner.com